Supporting Prime Minister Narendra Modi’s Start-Up India initiative, the Reserve Bank of India is considering making some regulatory changes to simplify and liberalise compliances associated with the start-up ecosystem.

RBI Governor Raghuram Rajan on Tuesday announced at the monetary policy review that it plans to allow start-ups to access rupee loans under the external commercial borrowing (ECBs) framework from eligible lenders. He also added that it would facilitate the issuance of innovative FDI instruments like convertible notes by start-up enterprises.

While, the changes in rules are being put in place and will be finalised in consultation with the Government, these steps are being lauded by the start-ups and industry experts, who feel that it will boost funding for start-ups. Amarjeet Singh, Partner – Tax, KPMG, said, “If proposals like permitting start-ups to access ECB and issuance of innovative FDI instruments, which are under consideration, go through, they will improve investor participation and help start-ups raise capital at lower cost and facilitate ease of doing business in the country.”

The central bank said that start-up enterprises can now receive foreign venture capital investment and also transfer shares from foreign venture capital firms to other residents or non-residents.

Besides, it would permit, in case of transfer of ownership of a start-up enterprise, receipt of the consideration amount on a deferred basis up to a period of 18 months, the RBI said in a statement.

The central bank said it will enable online submission of forms for outward remittances and ease the process for dealing with delayed reporting of FDI-related transaction by setting up a penalty structure.

Besides, it will clarify certain issues such as issuance of shares without cash payment through sweat equity or against any legitimate payment owed by the company and the issue of collection of payments by start-up enterprises on behalf of their subsidiaries abroad.

The Reserve Bank has already created a dedicated mailbox to provide assistance and guidance to the start-up sector.

Further, electronic reporting of investment and subsequent transactions will be made on e-Biz platform only. Submission of physical forms will be discontinued with effect from February 8.

Harish HV, Partner, Grant Thornton India, said, “These steps, together with the start-up action plan, and more initiatives expected from the Ministry of Corporate Affairs and the Budget, should help the cause of ‘Stay In India’ and create value in India.”

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